Seadrill Ltd. Q4 FY2024 earnings call

Recent Achievements

• Delivered against EBITDA guidance range in 2024, returned over $500 million to shareholders, and secured $1.3 billion in contracted backlog.
• Divested non-core assets for ~$400 million, including selling West Prospero for $45 million.
• Repurchased $100 million of shares in the fourth quarter, reducing issued share count by 22% since September 2023.

Market Outlook

• 2025 market softening due to demand deferral, but deepwater remains profitable with advantaged projects. 75% of marketed fleet contracted for 2025, and $3 billion in durable backlog through 2029.

Operations

• In Brazil, West Rio and West Polaris started contracts with Petrobras; West Telus had 50 days downtime due to regulatory matters.
• In the US Gulf, West Neptune resumed drilling after upgrades; West Vela had strong operational performance with additional work secured.
• Safety performance improved, with total recordable incident frequency rate nearly 20% below IADC average in 2024.

Legal Matters

• Petrobras asserted ~$213 million in penalties related to Sete Brazil project; Seadrill is engaged in discussions and evaluating options.
• Norwegian court awarded $48 million related to redelivery of Hercules rig; Seadrill disagrees and will appeal.

In 2024, Seadrill Limited achieved an adjusted EBITDA of $378 million on revenue of $1.4 billion. For the fourth quarter, total operating revenues were $289 million, with total operating expenses at $323 million. In 2024, the company secured $1.3 billion in contracted backlog, and in December 2024, added $1 billion in backlog with two long-term contract awards in Brazil. The share repurchase program returned a total of $792 million to shareholders through the end of 2024, with $100 million repurchased in the fourth quarter.

• Anticipates 2025 operating revenues between $1.3 billion and $1.36 billion (excluding $35 million reimbursable revenues).
• Adjusted EBITDA guidance range is $320 million to $380 million.
• Full-year capital expenditures expected to be in the range of $250 million to $300 million.
• First-quarter 2025 EBITDA adversely impacted by ~$55 million, but matters are now behind the company.

• Regulatory risks in Brazil leading to rig downtime, as seen with the 50 days of downtime on West Telus.
• Legal risks from Petrobras penalties and the Norwegian court decision on the Hercules rig.
• Market volatility and uncertainty in 2025 affecting rig utilization and day rates.

Q: Any color on the 50 days of downtime in Q1 for the Telus? Was there an incident, a stricter interpretation of existing rules, or something else? And is there anything you're seeing among the other impacted rigs that you could proactively address to minimize the potential for additional regulatory NPT in Brazil this year?

A: Simon Johnson stated the West Telus had 50 days of downtime due to regulator's interpretation of rules, and they are working with clients and regulatory bodies to navigate new expectations.

Q: Any color on the 50 days of downtime in Q1 for the Telus? Was there an incident, a stricter interpretation of existing rules, or something else? And is there anything you're seeing among the other impacted rigs that you could proactively address to minimize the potential for additional regulatory NPT in Brazil this year?

A: Simon Johnson stated the West Telus had 50 days of downtime due to regulator's interpretation of rules, and they are working with clients and regulatory bodies to navigate new expectations.

Q: Can you give us or can you characterize the tone and tenure of conversations that you've been having with certain clients, and with respect to their outlook for project economics?

A: Simon Johnson mentioned seeing more exploration activity (30% of rigs drilling exploration wells), and Samir Ali added clients' FID programs for starts in 2026-2027 with economic projects even at lower prices.

Q: How should we think about the OpEx budget for 2025, especially for a rig like Capella with no clear work?

A: Grant Creed said for Capella, they'll be disciplined, stacking it if no clear work, with one-off stacking costs ~$6-$10 million and run rate ~$5,000 per day.

Q: What's your view on M&A in the industry and your company's position?

A: Simon Johnson said he's a proponent of industry consolidation, but currently, everyone is focused on navigating uncertainty.

Q: Any thoughts on how the shift by oil majors back to traditional oil and gas impacts your business?

A: Simon Johnson said it's good to see capital allocation common sense, and they believe it benefits deepwater business over time.

Q: What is the true possibility of the Capella and Vela being recontracted this year? And specific to Capella, when would you think that you would make a decision to stack it for the time being?

A: Samir Ali said they're chasing opportunities for Capella and Vela, with a decision on Capella to be made in the near term if no clear line of sight to work.